How to easily classify innovation

Most people assume innovating means inventing a new product like an air-fryer or a portable fan. While these products could be considered as forms of innovation, by improving fryers or fans, innovation itself is much more expansive. Innovation can be broadly defined as the improvement of what already exists rather than the creation of something new. This improvement can be seamlessly applied to the value chain and answer consumer demands directly. Thus, innovation has an indisputable market-based quality to it that is intrinsically tied to a company’s strategic objectives. Further, innovation doesn’t necessarily revolve around a physical good as services or processes can also be improved to answer consumer demands. This article will examine the four fundamental types of innovation, examining the nature of the innovation, and the four innovation strategies, examining the objectives attained by an innovation. Both classifications can help understand what kind of innovation is appropriate for a firm.

Fundamental types of innovation

Product innovation

A product can be defined as a good or service that answers a consumer’s need. Product innovation includes a newly offered good or product or a considerable improvement of a good or product. Examples of product innovation include the release of the first iPhone in 2007 or the creation of hot yoga in the 1970s.

Process innovation

A process is an activity that aids in producing or delivering a good or in offering a service. Process innovation is the improvement of such a process to produce, deliver or offer a product more quickly, cheaper or with more functionality. A classic example of process innovation is Henry Ford’s manufacturing planning system invented in the 1920s to produce Ford’s renowned Model T.

Marketing innovation

Marketing generally includes anything that has to do with the sale of a product, notably the design, packaging, product placement, product promotion or pricing. Marketing innovation is the tweaking of any of those activities in a novel way, enhancing the company’s capacity to sell the product. A good example of marketing innovation is the advertising algorithms used by tech giants to segment a market into groups of consumers that are more likely to buy the product advertised.

Organizational innovation

An organizational method can include new commercial practices, a reorganization of the workplace or a change in the way relationships with external firms are managed. Organizational innovation is the use of a new method. Samsung’s dismantling of traditional vertical hierarchies in favour of horizontal structures is a typical example of organizational innovation.

Innovation strategies

Incremental innovation

Innovation can be incremental by continuously improving its capabilities over a long time. Generally, incremental innovation, or core innovation, happens gradually and applies novel technological components to a good to better answer changing consumer demands. Honda’s Civic is a prime example of incremental innovation, with close to 50 years of incremental change and added features.

Adjacent innovation

Innovation does not necessarily require a change in product and market. Adjacent innovation occurs when a company brings existing products to a new market or new products to an existing market. The goal of adjacent innovations is to leverage a product or market that a firm has a good grasp of to introduce a new angle to obtain new revenue streams. One can think of a house insurer expanding to car insurance or an aerosol air freshener company producing plug-in diffusers.

Disruptive innovation

The emergence of new technologies has led new firms and start-ups to make a service or product more accessible through reduced cost and ease of use. This is usually achieved by entirely changing the way the product is delivered, by disrupting the existing industry rivals and by becoming the industry leader in short order. Uber and other rideshare software companies are most often cited as having completely disrupted the existing taxi industry in many countries in the last decade.

Radical innovation

When a firm creates a new product that seeks to generate a new need amongst consumers, thus creating a new market, we are dealing with radical innovation. The arrival and popularization of television in the 1950s can be considered a radical innovation.

Classify, and then what?

Part of commercializing a new idea is to determine what you are offering the world. Nowadays, everyone and their dog has an app concept in their back pocket. What differentiates an idea from a successful business model is how the idea can be applied to the market. Innovation is at the intersection of idea and market. Understanding which type of innovation, a new idea will strive to become allows a firm to develop an effective business strategy.